NewAlpha taps French and Swiss for hedge fund seeding
French and Swiss institutions have put $150m into a hedge fund seeding vehicle run by NewAlpha Asset Management, marking part of a revival in the financing of new managers.
During the credit crunch the amount of finance available to new managers fell sharply, as backers baulked at activities they felt were too risky. Since then things have improved.
A survey Deutsche Bank published this month found over one third of seeders allocate between $25m and $50m per deal, compared to about 20% last year.
Multi-manager products such as NewAlpha, HFIM and FRM Capital Advisors are among prominent actors. Multi-managers comprise 47% of all seeders, with wealthy individuals and their offices (14%) next most prevalent.
“Funds of funds that can offer compelling seeding products to end investors will be able to significant assets from investors that may otherwise not invest via funds of funds,” Deutsche Bank said.
“There still remains a shortage of seed capital in the industry. The resulting power imbalance allows seeders to impose terms that are relatively challenging.”
NewAlpha’s product, NewAlpha 4 Genesis, will start deploying capital next quarter, after seeking to raise a further $100m to conduct a second closing in July. It will share fee income with managers – as do 45% of its peers – in return for the financing, help with risk management and asset raising.
Antoine Rolland, NewAlpha’s chief executive (pictured), said: “Despite the cautious attitude of institutional investors towards alternatives, this first achievement confirms the interest of institutional investors for hedge fund seeding.
“The recent market developments are reshaping deeply our industry where talented and under-researched investment talents are emerging globally.”
Analysis by Hedge Fund Research shows managers running for less than two years outperformed the industry by 6.3% between 1995 and 2009.
Since starting in 2003 NewAlpha has struck 14 strategic partnerships with managers and invested €380m globally.